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City Council trying to solve homelessness, parks and convention center puzzle

The Austin City Council meeting, August 29, 2017. (RALPH BARRERA / AMERICAN-STATESMAN)

When it comes to the Austin Convention Center expansion, you might say the actions of the City Council are puzzling.

Yes, I know that is a play on words, given the name Mayor Steve Adler dubbed his plan to expand the convention center, boost financing for cultural arts and address the city’s homeless community that is concentrated downtown near tourist venues.

But with so many moving parts and seemingly contradictory decisions, the mayor’s proposal truly is living up to its name: The “Downtown Puzzle.”

Last week, in a meeting that at one point turned uncharacteristically hostile on the dais as some council members and the mayor fought over how to use a portion of the hotel occupancy tax (HOT), the council endorsed a proposal by Council Members Ellen Troxclair, Kathie Tovo, Leslie Pool and Ann Kitchen to steer a slice of hotel taxes to historic preservation of amenities in parks, such as Barton Springs and Zilker Park.

On the surface, that action seemed to kill Adler’s puzzle plan that also relies on hotel taxes.

But when the dust — and the flared tempers — settled, an amendment was added that won Troxclair’s proposal a unanimous vote – including a yes vote from Adler. But here’s the thing: It also keeps Adler’s proposal alive for another vote expected later this month.

The secret, soothing sauce it seems was an amendment that calmed what otherwise was a bare-knuckle brawl pitting parks preservation funding against designated, and unprecedented, funding for permanent housing and other services for people experiencing homelessness. Adler’s proposal is estimated to generate about $4 million to $8 million a year for homeless services for a total of $68 million over 10 years.

As adopted by the council, Troxclair’s proposal directs the city manager to divert $11.9 million of the city’s portion of the HOT to fund “operations/maintenance of city of Austin historic facilities and sites in accordance with Texas Tax Code,” and bond requirements, then fund other eligible historic restoration or preservation projects.

That money would be carved from the yearly budgets of the convention center and Visit Austin, the city’s visitor bureau and marketing arm. Together they received $55.9 million this year in HOT revenue, which would drop to $55.3 million next year. In all, the city’s share of the HOT is 9 percent of the total 15 percent. The remaining 6 percent goes to the state.

But the amendment Adler added gives the council flexibility to look at other options for spending the HOT, including on an expansion of the convention center. So, both proposals are alive, at least for now.

As its name implies, hotel occupancy taxes are generated by fees charged to visitors when they stay in hotels in the city. That is an important distinction in understanding Adler’s plan and why the business case in terms of bookings and losses is trumped by a more relevant, pressing issue: Whether the expansion can be leveraged to access tens of millions in new dollars for projects the Austin community cares deeply about but lacks money to address, from homelessness to music.

Keep in mind that the $400 million to $600 million needed for the expansion would not add a penny to either homeowners’ tax bills or city sales taxes since it would be financed by HOT revenue.

Consider that the convention center is financed mostly by the HOT. Even when revenues and bookings don’t cover expenses, the convention center operates in the black because it receives more than enough revenue from the HOT to cover losses and generate a healthy reserve fund. Similarly, HOT taxes would finance the expansion by raising it to its maximum 17 percent, or 2 percent more.

Adler’s plan would use the expansion to leverage $400 million to $600 million in bond money, more than needed to pay off debt. The extra would steer an estimated $162.3 million to historic preservation over 10 years and about $36.3 million to music. Another $59 million would go for other eligible projects, including historic preservation, and the mayor told me, Austin’s burgeoning film industry.

Because HOT revenue is restricted, city legal has deemed it to be off limits for permanent housing for the homeless, though Adler wants to revisit that decision. Instead, he is proposing a Tourism Public Improvements District, which permits downtown hotel operators to tax themselves through that mechanism, again by charging fees to visitors staying at their establishments. The city’s slice, amounting to 40 percent, would be designated for housing and other assistance for the homeless.

What is unknown at this point is whether Adler’s proposal can survive if Troxclair’s uses all or most of the $11.9 million the council took from HOT revenue.

Starting Monday, the public will get a sense of whether both proposals can go forward or just one — Adler’s or Troxclair’s — when the council starts voting on its budget for next year.

That is when the council is expected to match dollars with proposals, which could eliminate, delay or reduce the size of either proposal.

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Here's where the American-Statesman's editorial board members give their take on the news of the day, as well as give insight and analysis on the issues that matter to Central Texans. On occasion, the Viewpoints blog will serve as additional space for editorials that reflect the opinion of the American-Statesman. And, from time to time, readers will find contributions from special guests. Blog contributors include: Juan Castillo, Bridget Grumet and Alberta Phillips.